ECO 561 TMS

Topics: Economics, Recession, Marginal cost Pages: 5 (1239 words) Published: July 14, 2014


Business Proposal Final for Thomas Money Service 
ECO 561
March 17, 2014
Business Proposal Final
Business Proposal for Thomas Money Service Inc. 
The current financial status of Thomas Money Service Inc. needs attention to help improve its existing goods and services to overcome the challenges faced by the economy downturn. This proposal will address those issues effecting the profitability of Thomas Money Service Inc. and strategize affective ways to overcome those obstacles to return to profitability.  “Thomas Money Service Inc. (TMS) has been in business since 1940” (University of Phoenix, 2012). The company started out granting small loans for consumer needs and evolved into offering business loans, business acquisition financing, and commercial real estate loans, (University of Phoenix, 2012). TMS expanded into equipment financing in 1946 under the subsidiary of Future Growth Inc. (FGI), (University of Phoenix, 2012). The venture in turn became very lucrative for TMS because of a huge demand in construction and forestry equipment after World War II (University of Phoenix, 2012). In 1951, FGI purchased an equipment manufacturing company building, selling, and financing their own building and forestry equipment and discontinued financing other equipment (University of Phoenix, 2012). For over 67 years it has been profitable and has stated in previous economic downturns that the company never had to lay off any of its workers, (University of Phoenix, 2012). However, in the current recession and after several natural disasters affecting forestry states, FGI profits declined last year by 30%. Home sales also declined, constructions slowed and caused FGI to repossess equipment and sell it at a discounted price. With the changing economic environment and profit loss Thomas Money Services Inc. has requested recommendations to help increase its revenue, determine its profit maximizing quantity, increase product differentiation, increase barriers to entry, and minimize cost of production.  Market Structure and Elasticity of Demand 

Thomas Money Services Inc. operates in a monopolistic competition by offering products and services that can be differentiated and is very competitive with other sellers offering similar products for consumption. By creating an environment in which consumers looking to purchase equipment could receive financing and goods in a one stop shop has positioned TMS as leader in the market share in the construction industry prior to the recession. Because there are similar products available for consumers to obtain instead of FGI’s equipment, it has to differentiate its product and services as the best to have by nonpricing competition. The price elasticity of demand for Thomas Money Services Inc. from its original price of $1990.1 to its new price of $1732.0 shows the responsiveness of consumer to the quantity demanded of goods and services at its new demand of 182 million units from it its original demand of 123 million units shows that the PEoD is 3.70 resulting in TMS being very elastic. Although Thomas Money Services Inc. has not been a price taker but a price maker distinguishing it has a one stop shop for consumer’s construction equipment. The market has changed resulting in consumer finding alternatives to TMS goods and services decreasing revenue over the last year. “There are many domestic and international companies manufacturing construction and forestry equipment” (University of Phoenix, 2012). Because TMS offers elastic goods and services it has to continue to monitor the market to understand the demand.  Recommendation 

Increase Revenue 
Increasing revenue is the objective for Thomas Money Services Inc. regardless of how the economy is doing. Because the market has declined in home sales, individual construction, and forestry equipment TMS should focus its marketing on hospital and nursing homes. According to University of Phoenix, not all sectors have been affected by the...

References: McConnell, C. R., Brue, S. L., & Flynn, S. M. (2009). Economics: Principles, problems, and policies (18th ed.). Boston, MA: McGraw-Hill Irwin. 
University of Phoenix. (2012). Thomas Money Service Inc. Scenario [Multimedia]. Retrieved from University of Phoenix, ECO/561 website.
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